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Porter 5 Forces

By | October 2008
Page 1 of 61
www.hbrreprints.org
The Five Competitive
Forces That Shape
Strategy
by Michael E. Porter
Included with this full-text
Harvard Business Review
article:
The Idea in Brief—the core idea
The Idea in Practice—putting the idea to work
1
Article Summary
2
The Five Competitive Forces That Shape Strategy
A list of related materials, with annotations to guide further exploration of the article’s ideas and applications
18
Further Reading
Awareness of the five forces
can help a company
understand the structure of its
industry and stake out a
position that is more
profitable and less vulnerable
to attack.
Reprint R0801E
The Five Competitive Forces That Shape
Strategy
page 1
The Idea in Brief The Idea in Practice
COPYRIGHT © 2008 HARVARD BUSINESS SCHOOL PUBLISHING CORPORATION. ALL RIGHTS RESERVED. You know that to sustain long-term profitability
you must respond strategically to
competition. And you naturally keep tabs
on your
established rivals
. But as you scan
the competitive arena, are you also looking
beyond
your direct competitors? As Porter
explains in this update of his revolutionary
1979 HBR article, four additional competitive
forces can hurt your prospective profits:

Savvy
customers
can force down prices
by playing you and your rivals against
one another.

Powerful
suppliers
may constrain your
profits if they charge higher prices.

Aspiring
entrants
, armed with new capacity
and hungry for market share, can
ratchet up the investment required for
you to stay in the game.

Substitute offerings
can lure customers
away.
Consider commercial aviation: It’s one of
the least profitable industries because all
five forces are strong.
Established rivals
compete intensely on price.
Customers
are
fickle, searching for the best deal regardless
of carrier.
Suppliers
—plane and engine
manufacturers, along with unionized labor
forces—bargain away the lion’s share of airlines’
profits.
New players...
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